Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

Obama’s MyRA Retirement Account Proposal - Will It Help Savers?

In President Obama’s State of the Union speech, a new retirement account was proposed call the MyRA. This MyRA is intended to provide retirement accounts to employees of companies that don’t offer plans. The President said he will direct the Treasury by executive order to create this new retirement plan.

Many savers may be wondering if this will help them. Thanks to DA member mustsavemore for asking this question in the forum. There are not many details that have been released about the plan. Before judging the plan, let’s first review how the President described it. Below is the State of the Union address transcript excerpt covering the MyRA (source NPR):

Let's do more to help Americans save for retirement. Today, most workers don't have a pension. A Social Security check often isn't enough on its own. And while the stock market has doubled over the last five years, that doesn't help folks who don't have 401ks. That's why, tomorrow, I will direct the Treasury to create a new way for working Americans to start their own retirement savings: MyRA. It's a new savings bond that encourages folks to build a nest egg. MyRA guarantees a decent return with no risk of losing what you put in. And if this Congress wants to help, work with me to fix an upside-down tax code that gives big tax breaks to help the wealthy save, but does little to nothing for middle-class Americans. Offer every American access to an automatic IRA on the job, so they can save at work just like everyone in this chamber can.

I appreciate the President’s concern that the stock market isn’t the universal silver bullet for building retirement savings. It’s nice to have products like savings bonds that offer decent returns with no risk of losing principal.

MyRA guarantees a decent return with no risk of losing what you put in.

I’m a little worried that the President wants to end tax breaks that help the wealthy to save. Some of those tax breaks may be helping savers who probably don’t consider themselves wealthy. That kind of thinking may have been the cause of the big reductions in the annual purchase limits of savings bonds (This decision was made in 2007 before Obama's administration.)

I’ve read a few OpEds about the proposed MyRA. This Forbes piece says the plan doesn’t go far enough to fix the retirement system. It concludes:

The problem isn’t that Americans don’t have enough ways to save for retirement — they have too many. Look at the alphabet soup of plans from 401(k)s, 403(b)s, 457s to Roth IRAs. Why not consolidate them and make the tax breaks uniform through credits?

An IRA consultant mentioned in this MarketWatch blog article that the MyRA "would be a way to put away additional money on a tax-deferred basis." However, an important question still needs to be answered. That is "how long someone would have to hold a MyRA before they can roll the money into their traditional IRA or other retirement account." Lastly, the article pointed out that the MyRA was just something mentioned in the State of the Union address. It doesn’t mean that the MyRA will soon be implemented.

Finally, I know it’s impossible to ignore politics from this topic, but in your comments let’s keep the discussion respectful to the President, to other government leaders and to other commenters.

I've heard rumors that Obama and Democrats want to get their hands on all the money in private retirement accounts, e.g., 401(k)s, 403(b)s, 457s, and Roth IRAs. Thanks to the SCOTUS and ObamaCare, all Obama has to do is require everyone to buy an ObamaRA plan else be penalized (read "taxed") on their private retirement savings.

The advantage of the ObamaRA is that the government will get everyone's retirement savings to spend on vote-buying welfare and crony capitalism government programs, instead of that money being put into the private sector.

We all know that Social Security is a Ponzi scheme. The SCOTUS has ruled that the money we workers pay into SS does not go into a dedicated account in our name, it is considered general revenue and does not belong to us.

The ObamaRA sounds like an expanded Social Security. We put money in and get a "guaranteed" return. Considering other government-sponsored guaranteed return products, except for the I-Series Savings Bonds, have below inflation rate returns, how will the government guarantee high, above inflation, rate of return without depending on increased tax burden on future generations?

Even if the money put into an ObamaRA plan does get invested into the private sector, do you really think that Obama and Congress can make better investment choices than you can or a private investment manager? And haven't we tried a system where the government has an ownership stake in industries? Isn't that what the USSR and their ilk have done and failed at?

“Similar to existing workplace deductions for savings bonds, the proposed “MyRA” retirement savings bond program is aimed at lower-wage workers, who would have tax benefits similar to individual retirement accounts, and whose accounts could be rolled into IRAs when balances reach a sizable amount. The new bond program would not require congressional action.”

The proposed MyRA is just a baby step toward funding one's own retirement. If people wish to participate in it, and a significant amount of lower-wage workers may not choose to for various reasons, what will the contribution limit be and who will set the guaranteed "decent return"? There is not enough details yet out there regarding this proposal and if it's another program with voluntary participation, I seriously doubt it will defuse the retirement time-bomb this country is facing by any extent.

I think workers have enough ways to save with even a Traditional or Roth IRA if they want to save. Unless workers are making enough money to have savings, what good does it do to bring forth a new way. We didn't watch the State of the Union Address so I didn't hear anything. It would be interesting to find out exactly what the government is up to with this new MyIRA. Maybe Obama will give poorer people money to put in it like he is giving out all those subsidies to people to purchase health insurance.

You can watch C-Span on the Washington Journal this morning on your computer and it will give you the explanation. FYI subsidies are being paid by means that were explained in this blog in another place. Your Part A in Medicare is being subsidized 100% by taxpayers and your Part B is being subsidized 65% also by Medicare taxes and taxes paid by high income people. Also you might want to know that Medicare does not have enough income and seniors having income over $49,000 might be paying more in 2017 as published in MarketWatch and other places.

It sounds like it will be an account that will be the option of the employee, whereas now a 401k is the option of the employer. The nature of the bonds remains to be seen, and how they will "guarantee a decent return," and what Obama's idea of a "decent return" is.

Frankly, I have to wonder how these are any different from the traditional US savings bond, the income on which is tax free -- more details needed, but my guess is that in addition to tax-free earnings on the bonds, you also would off tax on the initial investment tax until you cash the bonds in.

One thing I can't tell is whether everyone can start these at their work, or if only those who do not have a 401lk will be eligible for them. Also, who knows how this applies to those who are self-employed. And, they seem to carry the issue I have always had with all htest plans to set a certain amount aside tax benefitted: why only for earned income -- seems to me if you want people to save, it doesn't matter what income that comes from, earned or investment or whatever, as long as they save. When you do it only for earned income rather than regardless of income, simply a certain amount each year, then, for instance, people who have been out of work for the past 3-5 years in a bad economy, in the wrong field in the economy, and too old to get the interest of employers, can't put anything into it each year.

Everyone can have an IRA, not just the self-employed. the 401k's have been inn additoin to your personal IRA.

The self-employed don't get to sock away more for retirement. In fact, they can put away less. They do have the option to set up a SIMPLE IRA for their business, but when you get too small a business, that just doesn't work out very well. Nonetheless, even if you do it, you can't put as much in that as in a 401k, and there is no one matching your contribution, like in a 401k!

Nonetheless, I still say that savings for retirement should not have to come from earned income anyway. Everyone should get the same amount each year to put aside in tax free savings for retirement. It should not matter whether you take that out of paycheck or just move it from your taxable savings - what's the difference to the government? What we have now is that some people in some companies get to put away more than other people, and other people who maybe have savings but have lost their income, whether for a year or two or permanently, can't get any of the tax break -- and that can't make that up in later years, because once the year is over, you lose you chance for the amount for that year.

As the "details" leak out...MyRA limit is $15,000. At that point it must be transferred to a ROTH.

http://www.csmonitor.com/USA/Latest-News-Wires/2014/0129/State-of-the-Union-What-s-a-MyRA"Participants could save up to $15,000, for a maximum of 30 years, in their accounts before transferring their balances to a private-sector Roth IRA.""Initial investments could be as low as $25 and payroll contributions as low as $5. The plans, set up through the Treasury Department, would have a maximum balance of $15,000, after which money would have to be rolled over into a private-sector Roth IRA, the fact sheet said."

How a President can unilaterally dictate such things is beyond me and I've formally studied history/politics for a lifetime.

According to one of the articles I read, the interest from the savings bond is tax-free. How is this possible? The President can unilaterally declare a particular investment is not subject to taxes without legislation? When did this happen? Wow!

Roth retirement accounts are never taxed. Savings bonds are tax free if used for education. Savings bonds at one time (not sure about now) could be transferred to a child and if that child had little income little or no taxes would be paid on the interest.

Not sure you can still do this but even before the education bonds were offered you could transfer savings bonds to your child and have the child cash them in as we did when our oldest child went to college and because his income was too low to be taxed they were tax free. He is in his 50's now.

No longer the case...but we did it too by having the child buy initially in her name and when 2 filed a tax return to claim that interest/income on an accrual basis...worked quite well. Today one needs to use greater research to find a tool

I had purchased a bond a week in the 60's. In the 80's I sent them in and my name changed to my son's name and my husband as beneficiary. Then later my son cashed them in. I think the educational savings bonds had to be bought in the parents name. I do remember the accrual basis by claiming the interest every year on your tax return but we never did that.

5-10 years down the road... MyIRA accounts will be involuntarily be relocated "FAIRLY" to cover the less 'fortunate' who have not taken the time nor made life choices to prepare for retirement. And anyone who dares to speak up against this new fair policy will be r*cist, a poor hating winger etc...

Social Security was sure a great plan - until the government robbed it to spend on other vote-getting productions.... trust this current form of US Government with your money further than you have to and you are a blind fool.

Soon......Everyone that has been responsible and saved and maintained a retirement plan like an IRA will be called an evil "1% er" and a racist. Then the liberals will demand "fairness" and take money from the hard-working people and give it to the bums and deadbeats.

I think all seniors (me included) should be thankful for our SS checks. Many do not even have that much money coming into their household. We don't if we planned well have house payments. If we planned we shouldn't have a car payment. Why do we always want more? If you had no job, no income and maybe a family then you would have room to complain. I think unemployment checks for those that cannot get a job is more important than a little more interest on savings. At least we have savings. Many with families now do not even have that. There are ways to cut food bills, to cut utilities bills. All of us using this post have internet and I bet get a few TV channels also. Quit complaining.

It is quite obvious that many of the posters under this MyRA article have no idea what tax law is and what is available for saving for retirement. I would like to suggest some reading on the subject and maybe even reading some tax law on the subject. It is even more amazing that you are commenting on a suggestion that is not even law, not even written or voted on. Must a slow day for you.

If my comment is re-read anyone can understand that I asked if the President made "any proposal to help the current retirees". I was not refering to MyRA.I did not have the opportunity to listen to the "State of the Union" due to my cable provider coincidentally having an outage at the exact same time.

Thank you, #18. There are some who have decided to put the cart before the horse. I guess they took a course in predictions and forecasts, figuring they now have the answers. Social Security has been solvent for a very long time. If things head south it'll be due to the middle class now considered the lower income class; thereby, not being able pay the same amount because of how far behind wages have fallen, or so many not being able to find a decent paying job.

For the bloke who mentioned (you know who you are), "......the government will get everyone's retirement savings to spend on vote-buying welfare and crony capitalism government programs, instead of that money being put into the private sector.", you've got short-term memory issues. Isn't that what happened back in 2009 shortly after Lehman Brothers came tumbling down? My then supervisor at the time lost 30k in her 401k. My brother, however, who has been investing his retirement in government bonds for the past 20 years hasn't lost a cent. He said he would never gamble on Wall Street.

This appears to be some kind of "replacement" to the disappearing private pension plans of decades before. It does not make any mention about annuitizing the money when you retire, so it will provide lifetime income? I am still under the "old school" with a pension plan and 401(k) plan participation (along with my private IRA contributions). Hopefully, those three sources of income will provide a better retirement cushion than anything that they can come up with for the newer workers.

the myRA is a gimmick...this offering is nowhere close as an alternative/option to those who do not have 401ks or pensions. 401ks need profits to exist, or else an employer won't offer it. profits need a robust economy, Right now, with the lack of robust economy, this myRA is only a trick.

The MyRA dictum will come on the form of a Presidential executive order. Considering the tax consequences, I'm not sure it's legal. However, Congress is so inept they may never challenge the directive to the Treasury to set up such a plan. As in all Obama plans, the devil is in the details (e.g. shovel ready jobs).

The plan, as stated, is basically a lite ROTH IRA without fees. An individual can create their own self-directed ROTH IRA and invest in safe, secure instruments. The MyRA plan is nothing but a dumbed-down savings plan for adults. In my youth, children had more success with their weekly deposits in their personal Christmas savings account at the local bank! Gee, we learned to save by saving. Now there's an idea for the masses who haven't set aside anything for retirement.

The $15,000 hints at the silliness of this plan. In 30 years (their time frame, not mine), 15K will cover six months of groceries and gas. Call it a "saver-ready" plan and then recall the efficacy of all those "shovel-ready" jobs.

The MyRA proposal is a ruse to fool a group of non-savers into thinking they can join the universe of IRA owners by saving a few bucks a week. As many investors nearing retirement discover IRA's are not the panacea many believed they would be when they made their first contribution. I know a few million-dollar plus IRA holders and every one began saving nearly thirty years ago, maxed their contribution every year, received a decent match and adjusted their holdings to market conditions. When people at 60 ask, "What do I do to catch up", the unspoken answer is, "go back in time and start over." Unfortunately, life doesn't work that way.

Low income "savers" would amass more wealth by purchasing cheap phones, abandoning credit card interest, cooking their own food at home and depositing money in a regular savings account. I work with poor people and many have a better phone, drink overpriced coffees and smoke a pack a day. Discipline is what the President should be taking about when it comes to finances, personal or otherwise..

I think your comment is a very accurate assessment accept for the very first sentence. I still don't know what to make of Obama's "MyRa". All else is fact. Unfortunately, there is far too many people out there that refuse to face reality!

A mainstream press consensus is developing that summarizes the MyRA plan as "well intentioned", "ambitious" and "ineffective." Here's what the designers know full well:Companies do not have to participate and you cannot go it alone.Companies do not have to match (the true incentive inherent in IRA's).Contributions are post-tax (like ROTH IRA's).Principal is guaranteed (so are simple bank deposits).Interest rate is minimal and it fluctuates, hence there is no "guaranteed rate of return", as stated in some articles. And now for the reality check no one mentions...The low interest rate will at best offset inflation as reported by the government and MAY actually result in lost purchasing power due to what I call, "street level inflation." Traditional IRA investors are quickly discovering that their 300K portfolios won't do what they were told they would do, especially when the 4% withdrawal rate they were sold is now being recalled!

I say it's a ruse because the "designers" know full well this is pure politics, not meaningful policy.

Earnings cap for MyRA participation is $191,000. Say that with a straight face, if you can.

Also, every worker already sets aside a total of 12.4% each pay period for social security (6.2% employee, 6.2% employer). That's a rather healthy rate to set aside for retirement, so what's the problem? We all know the answer.

if i read the other replies, i'll probaby jump in and forget my oritinal reply/comment.Will it help the savers? not much.the myRA concept sounds good and has good intentions. But for most savers, it's just a gimmick and as a desperate saver, the myRA concept does not encourage me to save.Why I'm very hesitant to even consider this as a vehicle for savings:#1. It's a Roth IRA. Savers usually already know what a Roth IRA is and does ( max 5.5k contribution/yr) The way the myRA is being promoted, it says "like a Roth IRA" The fact is, it IS a Roth IRA...that happens to have no minimum amount to "open." However, people who know how to save might also know that places like ally bank also allow a person to open an IRA savings or CD with no minimum. What makes this sospecial? The "maximum income" of a person who can open the myRA is upto 191k...but I believe that if a person is earning that much, the person probably hopefully knows how to save and has an IRA, if not 401k, and additional savings vehicles.#2. This is to encourage the employers who don't offer a 401k to their employees to offer this "benefit." If there's no monetary incentive for an employer to offer a benefit to the employee, why would an employer do the extra steps/hassles for this program? Granted,the employer doesn't have to match, but nor does it gain any extra benefit in going through the hassle to "help" the employee reduce their pay by $5 per check to move it to a government department. Sure, an employer can say "we offer retirement savings options" without paying out of pocket, but if an employer who already doesn't offer an 401k, probably won't do more to help the employees in a monetary manner already.#3. 15k max before transferred to a regular Roth IRA...if a person already contributes to a Roth IRA, why even get this "myRA?" Why does the american public need to fund this executive order if there's already a Roth IRA?#4. Though it's said this is to encourage saving, I feel this is not helping people save. This effort feels like a cheaper version of social security. It's not an ADDITIONAL savings fro the person. It's another method of saving...in an IRA with low yield.#5. This offering doesn't seem to have much tax implications...because it's just a Roth IRA...Also, messing around with tax law is too much of a hassle. That being the case, the myRA looks less and less attractive.#6. Most of the time, people don't want to save as a priority. People want more to use, usually for spending on...groceries, bills, health...saving is if there's anything left at the end of the day. If the gov't forces a person to "save" (at a rate that's below inflation...the official numbers usually do not include food or gas...and so are artificailly low) the person might not have enough to survive, much less save up. If a person has more, then there's a possiblity of being able to save. Saving takes effort before it becomes a habit. This method is not helping; it's government assistance.

If it was closer to a 401k, then it would be more tempting. If it was in addition to annual IRA contributions, it might be more tempting. (it's "only" 15k, but if it's in addition to the annual 5.5k, then it's better than nothing) In a way, this almost is geared more for teenagers working summer jobs than the saver.sorry if my thoughts are confusing and don't make sense. just my 2 cents

This will be like a Roth. Only at $15,000 you can invest it in something else. Then do it again. This is not a limit of $15,000 it is a way to save more for those that have no pension plan at work. Another cheaper way for the lower wage people and another way for those with no plan to save more. When median total household income is just over $50,000 it is pretty hard to save anything when you have children, house payments, property taxes etc.

There are many specific details about myRAs that have not been revealed by the Treasury Department. Depending on the rules of the myRA, aggressive savers may be able to use myRAs to put their retirement savings into overdrive. Two big questions they’d ask:

Do contributions to myRAs affect the contribution limits to traditional and Roth IRAs? If the contributions limits are independent of each other, then someone can boost their tax-deferred savings by contributing to a myRA and rolling it over to an existing Roth IRA, allowing them to contribute in excess of the IRS annual limits.

What happens to the myRA after the balance is transferred to a private-sector Roth IRA? If the myRA remains open to more contributions after the balance is transferred, someone can continue to increase their retirement contributions in excess of annual limits on their Roth IRAs.

MyRA is nothing more than a Roth funded with low-rate Treasury instruments. At $15,000 or 30 years the money is automatically transferred to a private Roth account. I doubt the feds will allow manipulation of this account to "goose" tax free earnings, but they might. They (your friendly government agency) will choose the "investment" and the interest rate. More and more it sounds like a cheap money grab from low income workers.

I think many workers will become starry-eyed when their account hits a thousand dollar balance and start thinking, "It's my money, I want it now." I'm quite sure many will prematurely withdraw the majority of their "savings" at the first crisis, happy to pay whatever penalties are applied to the earned interest portion. I've watched more than a handful of people squander quarter million dollar inheritances in a few short years.

How about fixing social security to protect working non-savers?http://www.ssa.gov/news.htm

Perhaps we'll hear, "Welcome to 2033. Starting next month your social security payment will be 77% of last month's amount. We're sorry about this development, but you were warned about this in 2013. Income shortfalls, of course, can be supplemented with monies from your MyRA account. Thank you for continued support."

Hah, Obama and economics, those are two different species. MyRA is just a gimmick, same as his recovery, never happens and what would you do after you contribute $15,000, retire on it or take a vacation. You can do same thing with a saving account or CDs.

"The Obama administration would really like to create a broader program that automatically sets aside a portion of all worker savings into an IRA, unless they opt out of it. But that would require authorization from lawmakers in Congress, which is an unlikely proposition at best."

401K's are automatic, starting with 3% of salary and going to 6% increasing each year. Fully invested after 2 years. Many financial institutions only use their own investments for the 401K so that they will make more money in fees. With some 401K plans the participants pay for all the costs setting it up, audits (Many are not audited) administrative fees etc.